Dean's Ouster Raises Questions About Foundation Money

Who knew about the $500,000 payment Larry Sager received from the University of Texas School of Law’s foundation — and when — are among the many questions swirling after his surprise ouster as dean last week.

UT President Bill Powers said he was not told about the loan. Sager disputes that account, saying that it is his “clear understanding” the foundation — established in 1952 to help raise private funds for the law school — acted with Powers’ knowledge.

The conflicting answers illustrate the gray area between public and private in which the foundation operates — and the search for a resolution may prompt the university to re-examine the role that such foundations play in faculty compensation.

The “forgivable loan” issued to Sager in 2009 by the UT Law School Foundation, a private nonprofit run independently of the university, came to light in 75-page open records request made by three law school professors and obtained by The Texas Tribune last week. For Sager’s detractors, it is the most glaring example of the controversial faculty compensation practices that have for months caused significant unrest among professors at the law school, some of whom have leveled accusations of preferential treatment.

Powers told the Tribune in a statement that he asked Sager to step down because the dean’s relationship with the faculty “had become so strained that he was no longer able to serve effectively.”

“I don't remember ever being told about the loan to Dean Sager, and that's the sort of thing I would remember,” he said.

Sager said he has a “clear memory to the contrary” based on a conversation that he said he had with Powers in 2009. He said he played no role in obtaining the payment from the foundation.

“Whatever else is true about the loan, the decision was made by the president of the foundation, the executive committee of the foundation and the trustees of the foundation as a whole, “ Sager said. “I would not and could not have dictated this outcome.”

Foundation members, who number among the law school’s most prominent alumni, have been reluctant to talk publicly about the Sager ouster, or the payments they routinely make to lure — and keep — top professors. Robert Grable, who served as president when the foundation made the arrangement with Sager, did not respond to a request for comment.

Since Sager became dean in 2006, the foundation has granted 22 faculty members, including Sager, more than $4.6 million in “forgivable loans” to supplement their salaries from an endowment of privately raised funds.

Sager said he received the loan in acknowledgment of his strong performance as dean. By that time, he had made 11 new hires and raised $48.7 million in pledges and gifts to the foundation, according to fundraising numbers from the law school development office.

Offering compensation beyond a state-paid salary has become a crucial strategy for the law school in recruiting and keeping top faculty members. Without the power of the foundation to raise private money and supplement faculty salaries, the law school would be crippled, said Steve Susman, a top donor-alumnus and foundation member.

“If the law school is going to remain just a state law school supported by state money, I think it's going to drop to being a very mediocre law school,” he said. “The reason this law school has always been a great law school is because it has always gone to its alumni and said, ‘We need you in it.’"

The day after Sager’s resignation, UT Chancellor Francisco Cigarroa issued a statement calling for a review of how “funds flow to the Law School from the Foundation, how these decisions are made,” in order to “enhance processes, procedures and controls for those transactions in the future.” Cigarroa said the review’s findings would help establish “clear and transparent guidelines” for all UT institutions and affiliated foundations.

A spokesman for the UT System said that while the chancellor has no direct authority over faculty compensation at the law school, he wants to make sure everything is being done in an appropriate fashion.

In his statement, the chancellor limited his review to UT’s law school, as opposed to including all external foundations that support institutions within the system — such as the Sealy & Smith Foundation’s support of the UT Medical Branch at Galveston or the Southwestern Medical Foundation’s support for the UT Southwestern Medical Center at Dallas.

Another comparable group in Austin is the Lyndon Baines Johnson Foundation, which provides support to UT’s LBJ School of Public Affairs and the federal LBJ Library & Museum. For now, its operations are not being examined.

“I’m happy for the chancellor to review,” said Larry Temple, the current chairman of the LBJ Foundation and a former member of the UT Law School Foundation. “But there’s nothing about our foundation that’s similar to the kinds of things described in the newspaper” reports about the law school. 

For one thing, the LBJ Foundation does not provide loans, forgivable or otherwise, for faculty. While it does provide money for endowed chairs, Temple said, the foundation stays out of matters pertaining to specific faculty.

“We don’t have any involvement, any decision-making, any voice, any recommendation, any role in that,” he said. “We haven’t had any role and don’t want any role.”

Robert Hutchings, the dean of the LBJ School, said the school and the foundation work together to ensure that endowment funds are used as intended. Both organizations “want to keep the purposes very clear and transparent,” he said.

Powers is an ex-officio member of the LBJ Foundation, and Temple said he “certainly comes to meetings and is aware of what we do.”

“But, on a given determination of a specific amount,” Temple said, “he is never involved in that.”

David Onion, UT’s senior associate vice president for development, said the chief advantage of having donations go through a separate organization like the Law School Foundation or the LBJ Foundation rather than the university — the Longhorn Foundation, which raises money for athletics, is actually run by UT — is that they are set up as 501(c)(3) nonprofit organizations. As such, they have fewer restrictions on what types of gifts they can receive and can accept gifts from funding sources that only give to 501(c)(3)- designated groups.

Regarding the law school drama, Onion said he understands the need to remain competitive and recruit top faculty. But he said, “I’m a little disappointed, from a timing standpoint, that some of these transactions took place at a time when salaries were frozen across the university.”